అకౌంట్స్ గమనికలుLakshmi Vilas Bank Ltd.(Amalgmated)

Mar 31, 2018

A. BASIS OF ACCOUNTING:

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles, (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.

B. USE OF ESTIMATES:

The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reported income and expenses during the reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.

1. The reconciliation of inter branch transactions has been completed up to 31.03.2018 and tallying of balances is ensured on an ongoing basis.

2. Issue of Shares - Right Issue:

6,39,87,006 equity shares of face value of Rs. 10 each fully paid up were issued on rights basis for a price of Rs. 122 per equity share, including share premium of Rs. 112 per equity share in all aggregating to Rs. 780.64 crore on rights basis and 5,10,149 equity shares not allotted kept in abeyance during this rights issue.

3. DISCLOSURE REQUIREMENTS

3.1.1 In respect of securities held under HTM category, premium paid of Rs. 30.90 crore (previous year Rs. 13.72 crore) has been amortized during the year and debited under “Interest received on Investments”.

3.1.2 Sale and transfers to / from HTM category:

During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTM category as at the beginning of the year. The details of HTM category as on 31.03.2018 are furnished hereunder:

3.2.1 Disclosures on risk exposure in derivatives Qualitative Disclosure:

The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used to hedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.

a. To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribed in the Treasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthly basis for Foreign Exchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.

3.2.2 Shifting of securities:

For the year ended 31.03.2018, Bank has shifted securities amounting to Rs. 322.09 crore (Face Value) (Previous year Rs. 903 crore Face Value) from HTM to AFS category and no loss arose on such transfer (Previous year - no loss). Further, Bank has shifted securities amounting to Rs. 590 crore (Face Value)(Previous year Rs. NIL crore Face Value) from AFS to HTM category and loss which arose on such transfer amounting to Rs. 4.28 crore (Previous Year - No loss) has been provided during the year. Total loss during the year on account of shifting of securities is Rs. 4.28 crore (Previous Year - No loss).

3.2.3 Spreading of mark to market losses on Investments:

RBI vide circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 has permitted banks to spread the provisioning for mark to market (MTM) losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018 equally over four quarters respectively (commencing with the quarter in which the loss is incurred). Accordingly, Bank has provided Rs. 32.76 crore for depreciation of the investment portfolio for the quarter ended Mar 2018. The balance amounting to Rs. 98.29 crore will be provided in the ensuing three quarters.

3.3.1 Divergence in the asset classification and provisioning:

In terms of the RBI Circular DBR.BP.BC.No. 63/21.04.018/2016-17 dated 18^th April 2017, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI’s annual supervisory process in their notes to accounts wherever either a) the additional provisioning requirements assessed by RBI exceed 15% of the published net profits after tax for the reference period or b) the additional Gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the reference period, or both. Accordingly, divergence in Asset Classification and Provisioning for NPAs in compliance to Risk Assessment Report (RAR) of RBI for the financial year 2016-17 is reported hereunder.

C. Disclosure regarding amortization of Loss on sale of assets to ARCs

In terms of RBI guidelines, the Bank had opted to spread the net shortfall on account of sale of assets to Reconstruction companies during the financial year 2015-16 and 2016-17 over a period of 8/ 4 quarters and consequently the Bank has fully absorbed a sum of Rs. 31.29 Crore during the year ended 31^st March, 2018 (by corresponding reversal of the proportionate debit made earlier to Revenue and Other Reserves). The unamortized amount as at 31^st March, 2018 is Nil.

3.4.1 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.

A. SBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)

B. GBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)

3.4.2 Unsecured Advances (Amount of Advances for which, intangible securities has been taken):

3.5 Miscellaneous

3.5.1 Disclosure of Penalties imposed by RBI:

A penalty of Rs. 1,63,500/- has been imposed on account of Counterfeit Notes detected in currency chest transactions and a sum of Rs. 13,830/- by CCIL for shortfall in maintenance of margin in SGF deals.

4. Disclosure in terms of Accounting Standards:

4.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per Accounting Standard 5

There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2018 as compared to those in the preceding financial year ended 31.03.2017.

4.2 Accounting Standard 9: Revenue Recognition:

Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9

4.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):

In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the years 2010-11 & 2015-16 by the bank using the services of Banks approved empanelled Independent valuers. Appreciation arising out of such revaluation was accounted with corresponding credit to Revaluation Reserves. The details are as under

4.4 Accounting Standard 15 - Employee Benefits:

4.4.1 The bank is following Accounting Standard 15 (Revised 2005) “Employee Benefits” as under:

In respect of contributory plans viz. - Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at predetermined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixed contribution.

In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made based on actuarial valuation as per the guidelines.

The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:

4.4.2 Enhancement in Gratuity Limits:

Ministry of Labour and Employment, Government of India on 29^th March, 2018 enhanced the gratuity payable to an employee under Payment of Gratuity Act, 1972 to not exceed Rs. 20 lakh from earlier limit of Rs. 10 lakh. Employee cost for the quarter ended 31^st March, 2018 recognises the 1/4^th of impact of this change amounting to Rs. 3.75 crore. The unamortised amount on this account stood at Rs. 11.27 crore as on 31.03.2018 and will be spread over the next three quarters, as permitted by RBI vide DBR.BP.9730/21.04.018/ 2017-18 dated 27.04.2018.

4.5 Employee Stock Option Scheme:

As on 31.03.2017, number of options in force were 30,99,708. The Compensation Committee of the Board of Directors granted 32500 stock options on 22.02.2018 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme 2010 - LVB ESOS 2010. As on 31^st March, 2018, the options in force are 22,19,431. The Bank has provided a sum of Rs. 3.80 crore towards proportionate compensation expenses for the year ended 31^st March 2018.

4.6 Accounting Standard 22 - Accounting for Taxes on Income:

The Bank has recognized net Deferred Tax Assets as on 31^st March, 2018 aggregating to Rs. 464.95 crore (PY Rs. 65.22 crore) on timing differences pertaining to surplus provision for doubtful advances, Provision for Standard Advances, Leave Encashment, Special Reserve etc in accordance with Accounting Standard - 22 on “Taxes and income” issued by the Institute of Chartered Accountants of India. The major components of DTA / DTL are furnished as under:

4.7 Intangible Assets AS 26:

The Bank has followed AS 26 - Intangible asset and the guidelines issued by the RBI in this regard.

4.8 Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank’s assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank management, there is no impairment of other assets as at 31^st March 2018 requiring recognition in terms of the said standard.

5.1 Provisioning Coverage ratio:

The provision coverage ratio of the Bank as on 31.03.2018 is 55.07%.

5.2 Bancassurance Business:

Fees, remuneration received from Bancassurance business:

For the year ended 31.03.2018, the bank received Gross Commission income of Rs. 10.73 crore from Bancassurance business, of which Rs. 7.81 crore was from life insurance segment and Rs. 2.91 crore was from general insurance segment.

5.3.1 Priority Sector Lending Certificates (PSLCs):

The amount of PSLCs sold/purchased during the year (category-wise) is required to be disclosed as per RBI/2015-16/366 FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated: April 7, 2016.

During the year 2017-18, Bank has only purchased Priority Sector Lending Certificates (PSLCs) as detailed below:

5.4 Resolution Plan implemented for Stressed Asset:

The Banks are required to disclose resolution plan implemented for stressed assets as per the RBI Circular RBI/2017-18/131, DBR No.BP.BC.1010/21.04.048/2017-18 dated 12^th February 2018 and is furnished as under:

^@ The details furnished above excludes the borrower entities in respect of which specific instructions have already been issued by Reserve Bank of India to the banks for reference under IBC

5.4.1 Acquisition of Non-SLR securities due to conversion of debt during Restructuring process:

As per RBI Circular RBI/2017-18/131, DBR No.BP.BC.1010/21.04.048/2017-18 dated 12^th February 2018, disclosure is made as under:-

Bank has acquired and held shares for an amount of Rs. 116.16 crore by way of conversion of debt to equity during various restructuring process implemented by the bank. This amount is not considered for the calculation of regulatory ceilings / restrictions on Capital Market Exposures, Investment in Para Banking activities and intra-Group exposure. However, there is no implication on compliance of the provisions of Section 19(2) of the Banking Regulation Act.1949.

5.4.2 Revised framework for resolution of stressed assets

The Reserve Bank of India vide its circular dated February 12, 2018 issued a revised framework for resolution of stressed assets, which superseded the existing guidelines on SDR, S4A etc., with immediate effect. Accordingly, the Bank has revoked the stand-still benefits for accounts where any of these schemes had been invoked but not yet implemented and classified them as per the extant RBI Guidelines on Income Recognition and Asset Classification, as given here below

5.5 Unhedged Foreign Currency Exposure:

Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged Foreign Currency Exposure (UFCE) of their constituents in terms of RBI Circular No. DBOD.NO.BP.BC.85/21.06.200/2013-14 dated 15^th January 2014 and the total provision held as of 31^st March 2018 is Rs. 2.03 crore.

5.6 Details of Frauds occurred and Provision made during the year:

As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:

In terms of RBI guidelines, the bank had opted to spread the provision required for the outstanding balances in advance related fraud accounts over a period of four quarters and consequently bank has fully absorbed the unamortised amount of Rs. 49.21 crore during the quarter ended 31^st March 2018 (by corresponding reversal of the proportionate debit made earlier to Revenue and Other Reserves). The unamortized amount as at 31^st March, 2018 is Nil.

6.1 Qualitative disclosure around LCR

Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing the Liquidity Coverage Ratio with effective from 01^st January, 2015. As per these guidelines, the Bank has high quality liquid assets (HQLA) into Level 1 and Level 2A/2B. As on 31.03.2018, the Bank has Rs. 4554.10 Cr of HQLAs, of which, the main contribution is from Level - 1 type of assets with Rs. 4329.07 Cr. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR and Cash in Hand.

As on 31.03.2018, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of Rs. 2668.90 Cr of cash outflows and Rs. 1224.67 Cr of cash inflows over the next 30 days period. Of this total amount of Rs. 2668.90 Cr of cash outflows, the major component is in the form of contingent funding liabilities and of the total Rs. 1224.67 Cr of cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.

7. The disputed Income Tax demand outstanding as on 31.03.2018 amounts to Rs. 94.61 crore (previous year Rs. 100.43 crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favorable decisions by various appellate authorities on similar issues.

8. The financial statement of the Bank includes Advances (net of provisions) of Rs. 25768 crore after adjustment of third party deposits amounting to Rs. 794 crore. The Bank has received legal notice questioning the said adjustment. As per legal opinion received by the Bank, the adjustment of deposits against loan is lawful.

In the process of adjustment of the deposits as mentioned above, there was a resultant shortfall in the maintenance of CRR for a short period. The Bank has already notified RBI of the same.

No legal or regulatory proceedings are pending against the Bank on account of the above.

9. Previous year’s figures have been regrouped / reclassified wherever considered necessary to confirm to the current year’s classification.

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Mar 31, 2017

CAPITAL RAISED THROUGH QIP ISSUE

During the year 2016-17, the Bank has allotted 1,19,85,138 equity shares of face value of Rs. 10/- each at a premium of Rs. 130/ per share aggregating to Rs. 167.79 crore to Qualified Institutional Buyers.

1. In respect of securities held under HTM category, premium paid of Rs. 13.72 Crore (previous year Rs. 8.64 Crore) has been amortized during the year and debited under "Interest received on Investments".

2. Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.

3. SBL exceeded by the Bank for the period 01/04/2016 to 31/03/2017 ..... NIL (PY NIL)

4. GBL exceeded by the Bank for the period 01/04/2016 to 31/03/2017 -----NIL (PY NIL)

5. Miscellaneous

6. Disclosure of Penalties imposed by RBI:

During the year, Reserve Bank of India has imposed a monetary penalty of Rs. 3.00 crore for contravention of instructions relating to extending bill discounting facilities to non constituents and walk in customers, opening and operation of current accounts and non adherence of KYC norms.

RBI has imposed a total penalty of Rs. 7600 on account of Counterfeit Notes detected in currency chest transactions.

7. Disclosure in terms of Accounting Standards:

8. Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per Accounting Standard 5

There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2017 as compared to those in the preceding financial year ended 31.03.2016.

9. Accounting Standard 9: Revenue Recognition:

Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9

10. Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):

In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the years 2010-11 & 2015-16 by the bank using the services of Banks approved empanelled Independent valuers. Appreciation arising out of such revaluation was accounted with corresponding credit to Revaluation Reserves. The details are as under

11. Accounting Standard 15 - Employee Benefits:

12. The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:

In respect of contributory plans viz.- Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at predetermined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixed contribution.

In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made based on actuarial valuation as per the guidelines.

The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:

13. Qualitative disclosure around LCR:

Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing the Liquidity Coverage Ratio with effective from 01^st January, 2015. As per these guidelines, the Bank has high quality liquid assets (HQLA) into Level 1 and Level 2A/2B. As on 31.03.2017, the Bank has Rs. 1253.53 Cr of HQLAs, of which, the main contribution is from Level - 1 type of assets with Rs. 1206.08 Cr. The Level-1 assets are in the form of surplus SLR investments / Excess CRR and Cash in Hand.

As on 31.03.2017, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of '' 1533.72 Cr of cash outflows and '' 1189.34Cr of cash inflows over the next 30 days period. Of this total amount of Rs. 1533.72 Cr of cash outflows, the major component is in the form of unsecured wholesale funding and of the total Rs. 1189.34 Cr of cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.

6. a) The disputed Income Tax demand outstanding as on 31.03.2017 amounts to Rs. 100.43 Crore (previous year Rs. 60.11 Crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favorable decisions by various appellate authorities on similar issues.

7. The disclosure requirement on Specified Bank Notes (SBN) as envisaged notification no. GSR.308 (E) dated 30.03.2017 is not applicable to the bank since its financial statements are not presented as per schedule III of The Companies Act, 2013.

8. The Board of Directors has recommended a dividend of Rs. 2.70 per share (27%) for the year ended 31^st March 2017 (previous year Rs. 3 Per share (30%)), subject to approval of the shareholders at the ensuing Annual General Meeting. In accordance with revised Accounting Standards (AS) 4-Contingencies & Events occurring after the balance sheet date notified by the MCA on March 30, 2016, the proposed dividend including corporate dividend tax amounting to Rs. 62.21 crore has not been shown as an appropriation from the profit & loss appropriation account as of March 31, 2017 and consequently not reported the same under Other liabilities and Provisions as of March 31, 2017. For computation of capital adequacy ratio as of March 31, 2017, Bank has adjusted the proposed dividend for determining capital funds.

9. Previous year''s figures have been regrouped / reclassified wherever considered necessary to conform to the current year''s classification.

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Mar 31, 2015

1. CONTINGENT LIABILITIES As at As at 31-03-2015 31-03-2014

I.Claims against the Bank not acknowledged 210,81,50 126,81,98 as debts

II. Liability for partly paid Investments 0 0

III. Liability on account of outstanding 912,29,35 968,91,18 forward exchange contracts

IV. Guarantees given on behalf of constituents

In India 574,32,77 484,09,41

Outside India 97,89,76 112,77,88

V. Acceptances, Endorsements & Other 1097,68,58 1070,90,44 Obligations VI. Other items for which the Bank is 10,09,96 0 contingently liable

TOTAL 2903,11,92 2763,50,89

2. The reconciliation of inter branch transactions has been completed upto 31.03.2015 and tallying of balances is ensured on an ongoing basis.

3. Issue of Shares - Right Issue:

8,19,57,422 equity shares of face value of Rs. 10 each fully paid up were issued on rights basis for a price of Rs. 50 per equity share, including share premium of Rs. 40 per equity share in all aggregating to Rs. 406.30 Crore.

4. In respect of securities held under HTM category, premium paid of Rs. 8.45 Crore (previous year Rs. 7.55 Crore) has been amortized during the year and debited under interest received on Government Securities.

5. Sale and transfers to / from HTM category:

During the year, the value of sales and transfers of securities to / from HTM category has not exceeded 5% of book value of the investment held in HTM category at the beginning of the year.

6. Disclosures on risk exposure in derivatives Qualitative Disclosure:

The only derivative dealt by the bank in the Foreign exchange market is Forward contract. Forward contracts are being used to hedge/cover the exposure in the foreign exchange arising out of merchant transaction and trading positions.

To cover the risk arising out of the above derivatives, various limits like AGL, IGL and Stop Loss Limits have been prescribed in the Treasury Policy of the bank, which are monitored by mid office. The Mark-to Market values are monitored on monthly basis for Foreign Exchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.

7. Shifting of securities:

For the year ended 31.03.2015, Bank has shifted securities amounting to Rs. 95.00 Crore (face value) (previous year Rs. 642.76 Crore) from HTM to AFS category and loss amounting to Rs. 0.12 Crore, which arose on such transfer has been provided during the year.

8. Details of non-performing financial assets purchased / sold:

A. Disclosure regarding amortization of Loss on sale of assets to ARCs:

The net shortfall on account of sale of assets to reconstruction companies amounting to Rs. 100.42 crore is being amortized over a period of 2 years, as per RBI circular No. RBI/502/DBOD.BP.BC.No. 98/21.04.132/2013-14 dated 26-02-2014. Consequently, Rs. 27.43 Crore has been charged to Profit & Loss account for the year ended 31st March 2015. The unamortized amount on this account as on 31st March 2015 is Rs. 72.99 Crore.

B. Disclosure regarding amortization of fraud related advances:

As permitted by RBI vide its circular RBI/2014-15/535/DBR.No.BP.BC.83/21.04.048/2014-15 dated 01.04.2015, the outstanding balance in fraud accounts relating to advances amounting to Rs. 53.54 crore, is being provided over a period of four quarters. Consequently, Rs. 13.36 crore has been charged to profit & Loss account for the quarter ended 31st March 2015. The balance amount to be provided as on 31st March 2015 is Rs. 40.18 crore.

9. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the bank.

(As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.2014 to 31.03.2015 NIL (PY NIL)

B. GBL exceeded by the Bank for the period from 01.04.2014 to 31.03.2015 NIL (PY NIL)

10. Miscellaneous

Disclosure of Penalties imposed by RBI:

No penalties were imposed by Reserve Bank of India during the year.

11. Disclosure in terms of Accounting Standards:

11.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per Accounting Standard 5.

11.2 Accounting Standard 9: Revenue Recognition:

Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9.

11.3 Accounting Standard 15 - Employee Benefits

11.3.1 The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:

(1) In respect of contributory plans namely - Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at pre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixed contribution.

(2) In respect of Defined Benefit Plans, viz. Gratuity and Pension as well as for Leave Encashment, provision has been made based on actuarial valuation as per the guidelines.

Retirement benefits to employees:

a) The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:

11.3.2 Employee Stock Option Scheme:

During the year, the Compensation Committee of the Board of Directors in its meeting on 14.05.2014 has granted 5,00,000 stock options, grant date being 12.05.2014, to MD & CEO of the Bank under LVB ESOS 2010 at an exercise price of Rs. 36.95 per option. These options would vest over a period of 1 to 2 years.

As on 31st March, 2015, the options in force are 5,45,000. The Bank has provided Rs. 3.79 Crore being the proportionate compensation expenses for the period upto 31st March 2015.

11.4. Accounting Standard 17 - Segment Reporting:

GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is made under international segment.

Previous period's figures have been regrouped, wherever necessary to conform to the current period's classification.

* Segment results have been drawn up considering provision for non-performing assets as unallocated this year. Last year it was allocated among corporate & retail advances.

11.5. Accounting Standard 18 - Related Party Disclosures:

Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from 01/ 04/2014 to 31/03/2015, as detailed below:

S. No. Name Designation

1 Mr. Rakesh Sharma Managing Director & CEO

2 Mr. M. Palaniappan Chief Financial Officer

3 Mr. N. Ramanathan Company Secretary

11.6. Intangible Assets AS 26:

The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.

11.7. Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank management, there is no impairment of other assets to any material extent as at 31st March 2015 requiring recognition in terms of the said standard.

12. Additional Disclosures:

12.1. Draw Down from Reserves:

The bank has not utilized/drawn any amount from any of the reserves during the year under review.

12.2. Provisioning Coverage ratio:

The provision coverage ratio of the Bank as on 31.03.2015 is 60.84%.

12.3. Bancassurance Business:

Fees, remuneration received from Bancassurance business:

For the year ended 31.03.2015, the bank received income of Rs. 2.68 Crore (Gross commission) from Bancassurance business, of which Rs. 1.20 Crore from life insurance segment and Rs. 1.48 Crore from general insurance segment.

12.4. Prudential Regulatory treatment prescribed by RBI in respect of pension and gratuity:

In accordance with the Reserve Bank of India Circular under Ref No. DBOD.BP.BC.80 / 21.04.018 / 2010-11 dated 09-02-2011, the liability on account of employee benefits of Rs. 93.11 crore (towards pension Rs. 77.79 crore and towards Gratuity Rs. 15.32 crore) is amortized over a period of 5 years from FY 2010-11. The bank has charged to Profit & Loss Account a sum of Rs. 18.62 crore representing 1/5th of the said aggregate amount of Rs. 93.11 crore and the balance amount to be amortized as of 31st March 2015 is NIL.

12.5. Unhedged Foreign Currency Exposure:

Based on the available data, available financial statements and the declaration received from borrowers, the bank has estimated and provided Rs. 1.30 crore towards the liability for Unhedged Foreign Currency Exposure (UFCE) of their constituents in terms of RBI Circular No. DBOD.NO.BP.BC.85 / 21.06.200 / 2013-14 dated 15th January 2014.

13. Qualitative disclosure around LCR:

Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing the Liquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets (HQLA) into Level 1 and Level 2A/2B. As on 31.03.2015, the Bank has ' 983.03 Crore of HQLAs, of which, the main contribution is from Level - 1 type of assets with Rs. 924.01 Crore. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR and Cash in Hand.

As on 31.03.2015, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of Rs. 479.95 Crore of cash outflows and Rs. 929.20 Crores of cash inflows over the next 30 days period. Of this total amount of Rs. 479.95 Crores of cash outflows, the major component is in the form of unsecured wholesale funding and of the total Rs. 929.20 Crore of cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.

14. The disputed Income Tax demand outstanding as on 31.03.2015 amounts to Rs. 52.61 Crore (previous year Rs. 109.91 Crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favourable decisions by various appellate authorities on similar issues.

15. Previous year's figures have been regrouped / reclassified wherever considered necessary to conform to the current year's classification.

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Mar 31, 2014

1. The reconciliation of inter branch transactions has been completed upto 31.03.2014 and tallying of balances is ensured on an ongoing basis.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favourable judicial decisions on disputed issues.

(b) The disputed Income Tax demand outstanding as on 31.03.2014 amounts to Rs. 109.91 crore (previous year Rs. 138.10 crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favourable decisions by various appellate authorities on similar issues.

(c) In the current year, Rs. 6.01 crore being the interest on Income Tax refund is accounted based on assessment orders received.

* Base III compliant.

3.2.1 In respect of securities held under HTM category premium of Rs. 7.55 crore (previous year Rs. 3.81 crore) has been amortized during the year and debited under interest received on Government Securities.

RBI vide its circular No.DBOD.BP.BC.No.41/21.04.141/2013-14 dated 23.08.2013 has allowed banks to distribute the net depreciation on the entire AFS and HFT portfolio on the valuation date over the current financial year in equal instalments. The Bank had amortised such depreciation during the quarters ended September 2013 and December 2013. Bank has provided Rs. 10.37 crore in the current quarter and thus the depreciation on the entire AFS and HFT portfolio is fully recognised as at 31.03.2014.

3.3.3 Disclosures on risk exposure in derivatives

Qualitative Disclosure

The structure and organization for management of risk in derivatives trading:

The Bank deals with the primary level of currency derivatives in the form of basic forward contracts/swaps. These forward contracts are OTC traded through CCIL and they are for the Export oriented or Import oriented clients and subsequently hedged with other banks. The monitoring of foreign currency derivatives trading is monitored by Bank''s mid - office reporting to the IRMD. The trading and dealing foreign currency derivatives are part of the foreign exchange risk management policy, as per RBI guidelines and that is approved by Board. Some of the risk management methods are:

i. Setting limits for various types of activities in forex operations, depending upon the business requirements, setting stop limits for each deal, maintaining single deal size, measuring individual and aggregate gap limits for each currency etc.,

ii. Bank also measures the counterparty credit exposures for each counterparty on the basis of MTM values and potential future exposure values.

3.3.4 Shifting of securities:

For the year ended 31.03.2014, Bank has shifted securities amounting to Rs. 642.76 crore (face value) (previous year Rs. 190.58 crore) from HTM to AFS category and loss arose on such transfer amounting to Rs. 0.48 crore has been provided during the year. Further, Bank has shifted securities amounting to Rs. 569.21 crore (Face Value) (Previous year Rs. 169.64 crore) from AFS to HTM category and loss which arose on such transfer amounting to Rs. 7.09 crore has been provided during the year (previous year Rs. 1.24 crore). Total loss on account of shifting of securities is Rs. 7.57 crore during the year.

The provision coverage ratio of the Bank as on 31.03.2014 is 53.16%.

In respect of certain non-performing advances related to the previous year, bank has obtained dispensation from Reserve Bank of India vide RBI letter DBS.CO.PvtSBMD.No.2116/15.01.067/2013-14 dated 08.08.2013 and accordingly the bank has provided Rs. 81.45 crore during the year in respect of such advances, as permitted by RBI.

The exposure to capital market of Rs. 42.46 crore is within the limit of Rs. 362.38 crore (i.e. 40% of Bank''s Net Worth Rs. 905.94 crore as on 31.03.2013). The direct exposure to capital market is Rs. 33.94 crore and is within 20% of bank''s Net Worth amounting to Rs. 181.19 crore (i.e. 20% of Banks Net worth Rs. 905.94 crore as on 31.03.2013).

As the bank''s exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than 1% of total assets of the bank, no provision is considered necessary.

3.7.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the bank. (As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.2013 to 31.03.2014 - NIL

B. GBL exceeded by the Bank for the period from 01.04.2013 to 31.03.2014 - NIL

Current tax provision is made as applicable under Minimum Alternate Tax (MAT). Credit entitlement u/s 115JAA of the Income Tax Act 1961 is availed and considered as other asset.

3.8.2 Disclosure of Penalties imposed by RBI

Penalty charges of Rs. 2.50 crore was imposed by RBI during the year for non-compliance of RBI instructions on

KYC/AML systems.

3.9. Disclosure in terms of Accounting Standards:

Accounting Standard 15 - Employee Benefits

Payments to and provision for employees include provision made during the year towards pension, gratuity and leave encashment etc., in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employees

a) The summarized position of Post employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under.

3.10 Prudential regulatory treatment prescribed by RBI in respect of pension and Gratuity liability.

Reserve Bank of India issued guidelines vide their Circular No. DBOD.BP.BC.80 / 21.04.018/2010-11 dated 09.02.2011 and letter DBOD. No. BP.BC. 15896 / 21.04.018 / 2010-11 dated 08.04.2011. Accordingly, the liability on account of employee benefits of Rs. 93.11 crore (towards Pension Rs. 77.79 crore and towards gratuity Rs. 15.32 crore) is amortised over a period of 5 years from FY 2010-11. Accordingly, Bank has charged to Profit & Loss Account a sum of Rs. 18.62 crore, (representing 1/5th of the total amount) during the FY 2013-14. Unamortized amount of Rs. 15.56 crore in respect of pension liability and Rs. 3.06 crore, in respect of gratuity liability, are carried forward to be charged to P&L account in FY 2014-15.

Pending receipt of opinion from Expert Advisory Committee of Institute of Chartered Accountants of India as advised by RBI vide their letter dated 28.04.2014, The Lakshmi Vilas Bank Limited (Employees'') Pension Fund has valued at cost annuities purchased from LIC under Return of Capital (ROC) scheme for certain pensioners based on an expert opinion obtained as against the valuation made at Net Present Value (NPV) during the previous year. Bank has provided for the pension liability as per actuarial valuation accordingly.

3.11 Employee Stock Option Scheme

The Compensation Committee of the Board of Directors has granted in aggregate 1685238 stock options, grant date being 21.07.2011 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme 2010 - LVB ESOS 2010 at an exercise price of Rs. 61.25 per share. As on 31st March, 2014, the options in force are 390000. These options would vest over a period of 2 to 3 years and the Bank has provided Rs. 2.50 crore being the proportionate compensation expenses for the period upto 31st March 2014.

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Mar 31, 2013

1. The reconciliation of inter branch transactions and tallying of balances is ensured on an ongoing basis. Reconciliation of accounts with other Banks, in few branches, is in progress. The impact of the above, if any, on the financial results for the year ended 31st March 2013, in the opinion of the management, is not material.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favourable judicial decisions on disputed issues.

(b) The disputed Income Tax demand outstanding as on 31.03.2013 amounts to Rs. 138.10 Crores (previous year Rs. 202.26 Crores) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favourable decisions by various appellate authorities on similar issues.

(c) In the current year, Rs. 25.53 Crores being the interest on Income Tax refund is accounted based on assessment orders received.

3.1.1 Disclosure of Penalties imposed by RBI

In 2012-13, RBI has imposed a penalty of Rs. 7000.00 on account of two counterfeit notes detected in the chest balance and non-utilization of note sorting machine during inspection of currency chest.

3.2. Disclosure in terms of Accounting Standards:

Accounting Standard 15 – Employee Benefits

Payments to and provision for employees include provision made during the year towards pension, gratuity and leave encashment etc in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employees

a) The summarized position of Post employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under.

3.3 Prudential regulatory treatment prescribed by RBI in respect of pension and Gratuity liability.

Reserve Bank of India issued guidelines vide their Circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 and letter DBOD. No. BP.BC. 15896 /21.04.018/2010-11 dated 08.04.2011. Accordingly, the liability on account of employee benefits of Rs. 93.11Crores (towards Pension Rs. 77.79 Crore and towards gratuity Rs. 15.32 Crore) is amortised over a period of 5 years from FY 2010-11. Accordingly, Bank has charged to Profit & Loss Account a sum of Rs. 18.62 Crores, (representing 1/5th of the total amount) during the FY 2012-13. Unamortised amount of Rs. 31.12 Crores in respect of pension liability and Rs. 6.13 Crores in respect of gratuity liability is carried forward to be charged to P&L account in future periods.

3.4 Employee Stock Option Scheme

The Compensation Committee of the Board of Directors has granted in aggregate 1685238 stock options, grant date being 21.07.2011 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme 2010 -LVB ESOS 2010 at an exercise price of Rs. 61.25 per share. As on 31st March, 2013, the options in force are 410000. These options would vest over a period of 2 to 3 years and the Bank has provided Rs. 2.12 Crores being the proportionate compensation expenses for the period upto 31st March 2013.

4. Intangible Assets AS 26:

The Bank has followed AS 26 – Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.

5. Accounting Standard 28 – Impairment of Assets:

A substantial portion of the bank''s assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank, there is no impairment of other assets to any material extent as at 31st March 2013 requiring recognition in terms of the said standard.

6. Additional Disclosures

7.1 Provisions and Contingencies: Break up of ''Provisions & Contingencies'' shown under the head in Profit & Loss Account

8. Disclosures relating to securitization: NA

9. Credit Default Swaps: NIL

10. Previous year''s figures have been regrouped / reclassified wherever considered necessary to confirm to the current year''s classification.

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Mar 31, 2012

1. The reconciliation of inter branch transactions and tallying of balances is ensured on an ongoing basis. Reconciliation of accounts with other Banks, in few branches, is in progress. The impact of the above, if any, on the financial results for the year ended 31st March 2012, in the opinion of the management, is not material.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favorable judicial decisions on disputed issues.

(b) The disputed Income Tax demand outstanding as on 31.03.2012 amounts to Rs. 202.26 crores (previous yearRs. 204.59 crores) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favorable decisions by various appellate authorities on similar issues.

(c) In the current year, Rs. 4.70 crores being the interest on Income Tax refund is accounted based on assessment orders received.

3.1.1 In respect of securities held under HTM category premium of Rs. 4.50 crores (previous year Rs. 3.19 crores) has been amortized during the year and debited under interest received on Government Securities.

3.1.2 Sale and transfers to / from HTM category

During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTM category as at the beginning of the year. The following details are furnished as per the disclosure norms.

3.2.1 Disclosures on risk exposure in derivatives

Qualitative Disclosure

The Bank does not have exposure in derivatives. Therefore the qualitative disclosure on risk exposure in derivatives is "Not Applicable".

3.2.3 Shifting of securities:

For the year ended 31.03.2012, Bank has not shifted any securities from HTM to AFS category {previous year Rs. 96.32 crores (Face Value)}. Bank has shifted securities amounting to Rs. 440.00 crores (Face Value) (Previous yearRs. 226.66 crores Face Value) from AFS to HTM category and loss which arose on such transfer amounting to Rs. 18.81 crores has been provided during the year.

3.3.1 Particulars of Accounts Restructured

In accordance with the option given by the Reserve Bank of India, the Bank has made provision at 5% of the total dues to the Bank in respect of diminution in the fair value of restructured advances where the total dues to the Bank is less than rupees one crore. The auditors have relied on the data provided by the management in regard to the compliance of Reserve Bank of India circulars on full implementation of the restructuring packages in respect of the said restructured advances.

3.4.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the bank.

(As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.11 to 31.03.2012 ............ NIL

B. GBL exceeded by the Bank for the period from 01.04.2011 to 31.03.2012 ............. NIL

3.5.1 Disclosure of Penalties imposed by RBI

No Penalties were imposed by Reserve Bank of India during the year.

3.6. Disclosure in terms of Accounting Standards:

Accounting Standard 15 - Employee Benefits

Payments to and provision for employees include provision made during the year towards pension, gratuity and leave encashment etc in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employees

a) The effect of transitional liability till 31.03.2007 as required by the accounting standard has been recognized as an expense on straight line basis over a period of five years pursuant to limited revision of standard on 17.10.2007. Accordingly an amount of Rs. 3.96 crores has been charged to Profit & loss Account for the year ended 31.03.2012 being 1/5th of the transitional liability.

b) The summarized position of Post employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard - 15 (Revised) are as under.

3.7 Prudential regulatory treatment prescribed by RBI in respect of pension and Gratuity liability.

Reserve Bank of India issued guidelines vide their Circular No. DB0D.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 and letter DBOD. No. BP.BC. 15896 /21.04.018/2010-11 dated 08.04.2011. Accordingly, the liability on account of employee benefits of Rs. 93.11Crores (towards Pension Rs. 77.79 Crore and towards gratuity Rs. 15.32 Crore) is amortized over a period of 5 years from FY 2010-11. Accordingly, Bank has charged to Profit & Loss Account a sum of Rs. 18.62 Crore, (representing 1/5th of the total amount) during the FY 2011-12. Unamortized amount of Rs. 46.68 crore in respect of pension liability and Rs. 9.17 crore in respect of gratuity liability is carried forward to be charged to P&L account in future periods.

Further, in accordance with the RBI Guidelines vide circular No. DBOD. No. BP.BC. 15896 / 21.04.018/ 2010-11 dated 08.04.2011, the Bank has to charge the entire liability towards separated / retired employees on account of pension and gratuity for the y.e. 31/03/2011. As the II Pension option scheme was open at the time of finalization of Balance sheet for the FY 2010-11, the pension liability was estimated at 12.54 crores, and the same was provided. The pension process for the retired employees was completed in July 2011 and an additional amount of Rs. 12.03 crore was provided during FY 2011-12.

3.8 Employee Stock Option Scheme

The Compensation Committee of the Board of Directors has granted in aggregate 1685238 stock options, grant date being 21.07.2011 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme 2010 - LVB ESOS 2010 at an exercise price of Rs. 61.25 per share. As on 31st March, 2012, the options in force are 1385238. These options would vest over a period of 2 to 3 years and the Bank has provided a sum of Rs. 4.19 crore being the proportionate compensation expenses for the year ended 31st March 2012.

Deferred tax assets are recognized for future tax consequences of temporary differences arising between the carrying values of assets and liabilities and their respective tax bases and operating carry forward losses. Deferred tax assets are recognized only after giving due consideration to prudence. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. The impact on deferred tax assets and liabilities on account of a change in the tax rates is also recognized in the income statement.

4. Intangible Assets AS 26:

The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.

5. Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank, there is no impairment of other assets to any material extent as at 31st March 2012 requiring recognition in terms of the said standard.

6. Additional Disclosures

6.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head in Profit & Loss Account

7. Ban assurance Business:

Fees, remuneration received from Banc assurance business:

For the year ended 31.03.2012, the bank received income of Rs. 2.60 crore (Gross commission) from Bancassurance business.

8. Previous year's figures have been regrouped / reclassified wherever considered necessary to confirm to the current year's classification.

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Mar 31, 2011

1. (a) The reconciliation of inter branch transactions and tallying of balances in the accounts as per general ledger with those of subsidiary ledgers is in progress. The impact of the above, if any, on the financial results for the year ended 31st March 2011, in the opinion of the management, is not material.

(b) In a few branches, tallying of the balances in the accounts as per General Ledger with those of subsidiary ledgers/registers/schedules is in progress. The effect of this on the profit of the Bank is not ascertainable.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favourable judicial decisions on disputed issues.

(b) The disputed Income Ta x demand outstanding as on 31.03.2011 amounts to Rs.204.59 crores (previous years Rs.175.71 crores) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favourable decision by various appellate authroties on similar issues.

3.2.1. In respect of securities held under HTM category premium of Rs.3.19 crores (previous year Rs.3.39 crores) has been amortized during the year and debited under interest received on Government Securities.

3.3.3 Disclosures on risk exposure in derivatives

Qualitative Disclosure

The Bank does not have exposure in derivatives. Therefore the qualitative disclosure on risk exposure in derivatives is "Not Applicable".

3.3.4 Shifting of securities:

For the year ended 31-03-2011, Bank has shifted securities amounting to Rs.96.32 crores (Face Value) (Previous year Rs.291.50 crores Face Value) from HTM to AFS category and loss has arose on account of such transfer amounting to Rs. 0.12 crores has been provided during the year. Further Bank has shifted securities amounting to Rs.226.66 crores (Face Value)(Previous year Rs.92.93 crores Face Value) from AFS to HTM category and loss which arose on such transfer amounted to Rs.11.96 crores which has been provided during the year. Total loss on account of shifting of securities is Rs. 12.08 crores during the year.

3.4.2 Particulars of Accounts Restructured

In accordance with the option given by the Reserve Bank of India, the Bank has made provision at 5% of the total dues to the Bank in respect of diminution in the fair value of restructured advances where the total dues to the Bank is less than rupees one crore. The auditors have relied on the data provided by the management in regard to the compliance of Reserve Bank of India circulars on full implementation of the restructuring packages in respect of the said restructured advances.

3.7.4 Details of Single Borrower Limit (SBL)/Group Borrower Limit (GBL) exceeded by the bank. (As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.10 to 31.03.2011 NIL

B. GBL exceeded by the Bank for the period from 01.04.2010 to 31.03.2011 NIL

3.8.2 Disclosure of Penalties imposed by RBI

No penalties were imposed by Reserve Bank of India during the year.

3.9. Disclosure in terms of Accounting Standards: Accounting Standard 15 - Employee benefits

Payments to and provision for employees include provision made during the year towards pension, gratuity and leave encashment etc in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employees

a) The effect of transitional liability till 31.03.07 as required by the accounting standard has been recognized as an expense on straight line basis over a period of five years pursuant to limited revision of standard on 17.10.07. Accordingly an amount of Rs.3.96 crores has been charged to Profit & loss Account for the year ended 31.03.11 being 1/5th of the transitional liability. An amount of Rs.3.96 crores is being carried forward to be charged to profit and loss account in the next one year.

b) The summarized position of Post employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard - 15 (Revised) are as under:

3.10 Prudential regulatory treatment prescribed by RBI in respect of pension and Gratuity liability.

In terms of the requirements of the Accounting Standard - 15(Revised) - Employee Benefits, the entire amount of Rs. 93.11 Crores (towards Pension Rs. 77.79 Crore and towards gratuity Rs. 15.32 Crore) on account of re-opening of pension option and enhancement in Gratuity limit during the year, is re- quired to be charged to Profit & Loss Account. However, in accordance with the guidelines issued by Reserve Bank of India vide their Circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 and letter DBOD. No. BP.BC. 15896 /21.04.018/2010-11 dated 08.04.2011, the Bank has charged to Profit & Loss Account a sum of Rs. 18.62 Crore, (representing 1/5th of the total amount) and the entire liability of Rs. 12.54 Crore towards separated / retired employees on account of pension and gratuity liability. The balance unamortized amount of Rs. 62.23 Crore towards Pension and Rs. 12.26 Crore towards Gratuity is carried forward.

i) Deferred tax assets are recognised for future tax consequences of temporary differences arising between the carrying values of assets and liabilities and their respective tax bases and operating carry forward losses. Deferred tax assets are recognized only after giving due consideration to prudence. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. The impact on deferred tax assets and liabilities on account of a change in the tax rates is also recognized in the income statement.

ii) During the year, an amount of Rs. 7.50 crore (net) has been debited [Previous year Rs. 0.55 crore debited] to the Profit and Loss account by way of adjustment to Provision for deferred tax.

4. Intangible Assets AS 26:

The Bank has followed the AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI to this regard.

5. Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank, there is no impairment of other assets to any material extent as at 31st March 2011 requiring recognition in terms of the said standard.

6. Additional Disclosures

6.1 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises): During the year, Bank has revalued the Premises portfolio through the Bank's approved panel engineer / valuer and the market value of the premises has been taken into account. The following information has been disclosed as per the ICAI guidelines.

7. Bancassurance Business:

Fees, remuneration received from bancassurance business:

For the year ended 31.03.2011, the bank received income of Rs.2.55 Crore (Gross Commission) from Bancassurance business.

8. Previous year's figures have been regrouped / reclassified wherever considered necessary to conform to the current year's classification.

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Mar 31, 2010

1. (a) The reconciliation of inter branch transactions and tallying of balances in the accounts as per general ledger with those of subsidiary ledgers in progress. The impact of the above, if any, on the financial results for the year ended 31st March 2010, in the opinion of the management, is not material.

(b) In a few branches, tallying of the balances in the accounts as per General Ledger with those of subsidiary ledgers/registers/schedules is in progress. The effect of this on the profit of the Bank is not ascertainable.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favourable judicial decisions on disputed issues.

(b) The disputed Income Tax demand outstanding as on 31.03.2010 amounts to Rs.175.71 crores (previous years Rs.132.20 crores) and is included under Item I of Schedule 12 (Contingent Liabilities) out of the above Rs.109.21 crores (Previous year Rs.109.21 crores) has been paid or adjusted by the Income Tax department. No provision is considered necessary in respect of the disputed liabilities in view of favourable decisions by various appellate authorities on similar issues.

3.3.3 Disclosures on risk exposure in derivatives

Qualitative Disclosure

The Bank does not have exposure in derivatives. Therefore the qualitative disclosure on risk exposure in derivatives is "Not Applicable".

3.3.4 Shifting of securities:

For the year ended 31-03-2010, Bank has shifted securities amounting to Rs.291.50 crores (Face Value) (Previous year Rs.NIL crores Face Value) from HTM to AFS category and no loss has arose on account of such transfer. Bank has shifted securities amounting to Rs.92.93 crores (Face Value)(Previous year Rs.205.00 crores Face Value) from AFS to HTM category and loss which arose on such transfer amounted to Rs.4.68 crores which has been provided during the year.

3.3.6 Un-reconciled Nostro entries taken to General Reserve

During the year ended 31.03.2010, in terms of RBI circular DBOD No. BP.BC.133/21.04.018/2008-09 Dated 11th May 2009, Bank has credited Rs.6.47 lakhs to the Profit & Loss account in respect of outstanding credit entries of individual value of less than USD 2500 or equivalent in Nostro account originated upto March 31, 2002. The same has been appropriated to Revenue Reserve and will not be available for declaration of dividend.

3.4.2 Particulars of Accounts Restructured

In accordance with the option given by the Reserve Bank of India, the Bank has made provision at 5% of the total dues to the Bank in respect of diminution in the fair value of restructured advances where the total dues to the Bank is less than rupees one crore. The auditors have relied on the data provided by the management in regard to the compliance of Reserve Bank of India circulars on full implementation of the restructuring packages in respect of the said restructured advances.

3.7.4 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank. (As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.09 to 24.11.2009 (Based on the capital funds of Rs.507.54 as on 31.03.09) - NIL

B. SBL exceeded by the Bank for the period from 25.11.2009 to 30.12.2009 (Based on the capital funds of Rs.601.14 crores as on 25.11.09)

C. SBL exceeded by the Bank for the period from 31.12.2009 to 31.03.2010 (Based on the capital funds of Rs.856.80 crores as on 31.03.2010) – NIL

3.7.6 Letter of Comforts issued by the bank (As compiled b management)

Letter of comfort issued in earlier years and outstanding as on 01.04.09 NIL

ADD: Letter of comfort issued during the year NIL

LESS: Letter of comfort expired during the year NIL

Letter of comforts outstanding as on 31.03.2010 NIL

3.8 Miscellaneous

3.9. Disclosure in terms of Accounting Standard

Employee benefits (AS 15R)

Payments to and provision for employees include provision made during the year towards pension, gratuity and leave encashment etc in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employees

a) The effect of transitional liability till 31.03.07 as required by the accounting standard has been recognized as an expense on straight line basis over a period of five years pursuant to limited revision of standard on 17.10.07. Accordingly an amount of Rs.3.96 crores has been charged to Profit & loss Account for the year ended 31.03.10 being 1/5th of the transitional liability. An amount of Rs.7.92 crores is being carried forward to be charged to profit and loss account in the next two years.

b) Impact of salary revision, on retirement benefits, will be accounted on finalization of revised salary of employees.

c) The summarized position of Post employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard-15 (Revised) are as under.

i) Deferred tax assets are recognised for future tax consequences of temporary differences arising between the carrying values of assets and liabilities and their respective tax bases and operating carry forward losses. Deferred tax assets are recognized only after giving due consideration to prudence. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. The impact on deferred tax assets and liabilities on account of a change in the tax rates is also recognized in the income statement.

ii) During the year, an amount of Rs. 0.55 crore (net) has been debited [Previous year Rs. 6.09 crore debited] to the Profit and Loss account by way of adjustment to Provision for deferred tax.

8. Intangible Assets AS 26:

The Bank has followed the AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI and has consistent with the compliance.

9. Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank’s assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank, there is no impairment of other assets to any material extent as at 31st March 2010 requiring recognition in terms of the said standard.

10. The Bank earned a profit of Rs.0.66 Crores on sale of securities under HTM category in the year 2009-10. As per the guidelines of the Reserve Bank of India, this profit has been transferred to Capital Reserve.

Note: In terms of RBI circular DBOD.BP.BC. 48/21.04.048/2008-09 dated 22.09.2008, the bank has utilized a sum of Rs.NIL (previous year Rs.1.62 crore) from Floating provision for NPAs and credited the same to Profit & Loss Account on account of unapplied interest, penal interest and miscellaneous charges etc. in respect of Agriculture Debt Waiver & Debt Relief Accounts.

11. Bancassurance Business:

Fees, remuneration received from bancassurance business:

For the year ended 31.03.2010, the bank received income of Rs.1.92 Crore from Bancassurance business.

12. Agriculture Debt Relief Scheme

In terms of Reserve Bank of India guidelines, the Bank has implemented the Agricultural Debt Waiver and Debt Relief Scheme 2008 :

(i) a final claim of Rs.17.59 crores under the Scheme has been preferred with Reserve Bank of India. The same has been certified by the Statutory Central Auditors. An amount of Rs.11.42 crores (i.e.) 65% of the total claim amount has been reimbursed by RBI till date.

(ii) further an amount of Rs. 3.59 crores is eligible for Relief under the said scheme and the Bank has submitted a preliminary claim for Rs 2.72 crores.The claims relating to Debt Relief are subject to verification by the Statutory Central Auditors. The bank has made a provsion for loss in Present Value terms in accordance with RBI Scheme amounting to Rs.0.14 crores.

13. Share Capital & Issue Expenses netted against Share Premium Account

The share issue expenses of Rs.1.71 crores was netted against the Share Premium Account of Rs.214.41 crores collected during rights issue during the year.

14. Previous years figures have been regrouped / reclassified wherever considered necessary to conform to the current years classification.